New Delhi: ITR Filling 2024 will end on July 31, 2204, for taxpayers aiming to avoid penalties. For taxpayer sunder the old tax regime, house rent allowance or HRA payment helps in saving Income Tax outgo. HRA claims while filing Income Tax returns are a common practice for taxpayers. However, submitting Fake Rent receipts can lead to a notice from the Income Tax (I-T) department. With the help of data analytics and artificial intelligence, the I-T department is targeting taxpayers who furnish fake rent receipts.
Penalty for fake rent receipts
Using fake rent receipts can lead to penalties and legal repercussions under Section 270A of the Income Tax Act, of 1961.
Assesses may face penalties of up to 200 per cent of the tax payable on underreported income.
Potential charges of tax fraud and increased tax liability for both the taxpayer and the landlord are also there.
How fake rent receipts are identified?
The I-T department uses several methods to detect fraudulent activities, including:
Data Analytics: Identifying discrepancies in HRA claims across multiple employers.
Artificial Intelligence: Detecting patterns indicative of fake rent receipts.
Verification: Cross-checking rent receipts with landlord details and transaction records.
Can you pay rent in cash?
Paying rent in cash to conceal transactions can further complicate matters since it poses significant challenges, especially when it comes to verification.
If tax authorities question the authenticity of these payments, proving them as genuine can be difficult.
Such transactions invite increased scrutiny from tax authorities.
Both the taxpayer claiming HRA and the landlord receiving the rent may face inquiries and heightened tax liabilities if inconsistencies or discrepancies are detected.
Relying on cash transactions to manage rent payments for tax benefits can lead to serious legal and financial repercussions.
Benefits of HRA for taxpayers
To qualify for House Rent Allowance (HRA), you have to provide proof of rent payment through rent receipts. These serve as evidence for employers to verify and grant deductions accordingly. The amount of HRA that can be claimed as tax-free is determined based on specified criteria under Section 10(13A) of the Income Tax Act. The eligible deduction is calculated as the least of:
the actual HRA received,
50 per cent of salary for individuals residing in metro cities or 40% for those in non-metro areas,
the difference between actual rent paid and 10% of annual salary.
To reduce your tax liability, ensure you file your ITR for the FY24 (Assessment Year 2024-25) promptly. Remember to submit genuine receipts as the risks of detection and severe penalties outweigh the benefits. It’s crucial to comply with tax regulations and avoid engaging in fraudulent practices to ensure financial integrity and avoid legal consequences.
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Fake rent receipts: Relying on cash transactions to manage rent payments for tax benefits can lead to serious legal and financial repercussions. Such transactions invite increased scrutiny from the authorities. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
